After a breathtaking month of soaring market gains, investors are left wondering what triggered the sudden dip in the Nifty IT index. Let’s find out.
Over the past month, investors have been caught up in a mesmerising bull run, where the markets soared to astonishing heights. But just as the celebrations seemed endless, a sudden twist of fate shook the market on the 21st July 2023, disrupting the Nifty’s bullish party.
Who was the catalyst behind this dramatic downturn? Well, it was none other than Nifty IT itself.
Let’s find out why IT stocks came under pressure all of a sudden.
What’s Happening?
Let’s take a closer look at Nifty’s performance over the span of a month. On the 21st June 2023, Nifty was trading at 18,856.85 levels. Fast forward to the 20th July 2023, and the Nifty surged remarkably to 19,979.15. That’s an impressive climb of 5.93%.
However, the market took an unexpected turn on the 21st July 2023. The catalyst behind this dramatic downturn was the decline in the share prices of information technology stocks, leading to a significant plunge in Nifty IT.
During the short period from the 21st June to the 20th July 2023, Nifty IT showed an impressive increase of about 7.31%. Investors celebrated the bullish trend, but their joy was short-lived. On the 21st July 2023, Nifty IT unexpectedly tumbled around 4% in just one trading session, dampening the bullish spirits.
Reason Behind the Fall of Nifty IT
On the 21st July 2023, the primary reason behind the Nifty IT fall was the shocking revenue guidance cut by Infosys. The company’s June quarter earnings, which were announced a day earlier on Thursday, 20th July 2023, revealed a substantial reduction in the FY24 revenue guidance. This cut sent shockwaves through the market and resulted in increased selling pressure among IT stocks.
Infosys, one of the prominent players in the IT sector, adjusted its FY24 revenue guidance to a mere 1% – 3.5% in constant currency terms, a significant drop from the previously projected 4% – 7%. This revised growth projection stands as the lowest in over a decade, adding disappointment among investors.
In addition to the revenue guidance cut, Infosys shared some other noteworthy financial details. The voluntary attrition rate for Q1FY24 decreased to 17.3% from 20.9% in the previous quarter, indicating a potential stabilisation of the workforce. However, the company’s constant currency revenue growth for Q1FY24 was reported at a modest 1% quarter-on-quarter.
Furthermore, Infosys disclosed a total contract value (TCV) of $2.3 billion in Q1FY24, a slight increase from $2.1 billion in the previous quarter (Q4FY23). This metric indicates the value of contracts the company has secured during the specified period.
The impact of Infosys’s revenue guidance cut was not limited to the company itself; the sentiment was spread across the entire IT sector. Other significant players in the industry, including Persistent Systems Ltd, Wipro Ltd, HCL Tech Ltd, and Tech Mahindra Ltd, also witnessed a decline in their share prices on the same day.
What’s Next?
Investors’ confidence will depend on how IT companies handle the current challenges and use growth opportunities. Although recent market events caused cautious selling, there is hope that the IT sector can bounce back and recover in the long term.
That’s it for today. We hope you’ve found this article informative. Remember to spread the word among your friends. Until we meet again, stay curious!
*The companies mentioned are for information purposes only. This is not an investment advice.
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